Sony and Toshiba Set to Increase Chip Spending in 2013 as They Strive to Recover

Published on: 6th Dec 2012

Note -- this news article is more than a year old.

Despite weak financial results, leading Japanese consumer electronics original equipment manufacturers (OEMs) Sony and Toshiba during the next two years are expected to increase their semiconductor spending as they invest in a wide range of innovative new products to revitalize their businesses.

Sony next year is expected to purchase $8.4 billion worth of semiconductors,
up nearly 5 percent from $8.0 billion in 2012, according to IHS. Company
spending will rise slightly again the following year by 0.1 percent.

Meanwhile, Toshiba's spending will increase 2.0 percent to $6.1 billion in
2013, up from $6.0 billion in 2012. Toshiba's spending will surge by another
6.3 percent in 2014, reaching $6.5 billion, as presented in the figure below.

In contrast, spending at the other major Japanese consumer electronics OEMs,
Panasonic and Sharp, will decline in 2013 and 2014 -- with Panasonic enjoying a
minor rebound of 2.4 percent in 2014.

"All the Japanese consumer electronics OEMs are struggling financially -- prompting
them to take measures to cut costs in order to shore up their profits," said
Myson Robles-Bruce, senior analyst for semiconductor spending and design
activity at IHS. "But even in these grim circumstances, Sony and Toshiba
remain optimistic about the future, and are taking steps to invest in innovative
products. This will cause their spending on semiconductors to rise in the coming
years."

2012 Brings Disaster for Japan's CE Firms

The major Japanese consumer electronics manufacturers have been negatively
impacted by a range of different factors this year, including economic slowdown
in key markets of the world, lower demand plaguing certain product segments, and
increasingly difficult competition from South Korean and Chinese rivals.
According to the latest financial results, Panasonic, Sony, Toshiba and Sharp
will all suffer losses this year.

As a group, the four companies will see their revenue decline by nearly 7
percent in 2012 compared to 2011.

Because of its financial difficulties, Sony has issued bonds twice this year,
to raise funding. This effort comes even as the company has had its credit
rating dropped to the lowest investment grade by Moody's. Sony is now in the
process of eliminating 10,000 jobs by the end of its 2012 fiscal year, and it is
also selling off assets such as manufacturing plants and shares in joint
ventures. Sales estimates for its various products lines including televisions,
cameras and gaming devices have been cut significantly for this year.

Sony Looks to the Future

However, proof that the spirit of innovation is alive and well at Sony and
Toshiba was in evidence at the October 2012 CEATEC, Japan's version of the
Consumer Electronics Shows (CES).

Sony at CEATEC demonstrated a wide range of products including smartphones,
tablets, PCs, cameras, televisions and home networking and storage equipment.
Some of the highlights included the Bravia 4K liquid crystal display television
(LCD TV), and new hybrid PCs, which can be utilized as either tablets or
laptops.

Beyond the CEATEC show, Sony has also indicated that it is developing a new
"phablet" handset device. The company is likewise working on its PlayStation
4 game console device, which could be released late next year.

Toshiba Moves to the Cutting Edge

At CEATEC 2012, Toshiba was also on hand to showcase its latest products,
which included a 4K resolution television. Other featured products included
ultrabooks and tablets. Toshiba was able to debut products in small, medium and
large screen sizes. Additionally, the company introduced new REGZA HDTVs, which
offer built-in DVR capability for time shifting.

Can Japan Regain Consumer Electronics Leadership?

IHS predicts Sony will bounce back with 3.7 percent revenue growth in 2013.
However, Toshiba will suffer another 1 percent decline. Declines in 2013 revenue
are expected at Panasonic and Sharp as well.

The question remains whether the current downturn will be a long-term trend
or if these companies eventually will recover and shine once more.

"The Japanese consumer electronics companies face a changed marketplace,
due to the rising influence of Apple and other competitors that have redefined
some of the product segments or else simply just taken away share in key areas,"
Robles-Bruce said. "Based upon the current financial evidence, it appears as
though total revenue for Sony might be higher for next year, although estimates
for Toshiba actually show a slight decline."

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